On February 26, the House Committee on the Judiciary held its first hearing in a series titled “Reviving Competition, Part 1: Proposals to Address Gatekeeper Power and Lower Barriers to Entry Online.” This series is a clear attempt to make the case for increased partisan antitrust enforcement, and yesterday’s hearing featured several claims and recommendations that would be extremely problematic for taxpayers and consumers. The attempts to punish tech companies for perceived grievances would mark a stark departure from the consumer welfare standard, increase politicization of antitrust enforcement, and harm the user experience. The idea that consumers do not have a choice online is misguided and represents a fundamental misunderstanding of the marketplace.
The significant portion of the hearing focused around competition, self-preferencing (vertical integration), and so-called monopolies (yes, plural). Is there a competition problem in the online marketplace? It’s a debatable question but evidence suggests that competition is not lacking. Online companies are forced to adapt to a dynamic marketplace or risk falling by the wayside. These online companies display the competitiveness in the market by rapidly incorporating or enhancing features that come from competitors in order to bring consumers a better experience. A monopoly would not need to innovate so consistently and the behavior we see in the digital space shows the free market is working for consumers.
However, some lawmakers would seek to shift focus from the consumer to the competitors. The consumer welfare standard ensures an even-handed and light-touch approach to antitrust policy. To be clear, antitrust policy shouldn’t be used to ensure competitors have equitable access and reach, and Congress shouldn’t disrupt the free market to promote and protect certain businesses from others. Doing so could cause harm to consumers. Consumers have benefited from the battling of online companies to provide superior service, and the government should not be in the position to pick winners and losers—especially on a partisan basis.
Lawmakers and witnesses homed in on “self-preferencing,” saying companies like Amazon or Apple are damaging the market and competitors by pushing their own products onto consumers. While the goal of this was to point fingers at companies for selling their own products, this is a common practice in the market—especially retail. Costco sells its own Kirkland brand, Netflix produces its own movies and shows, oil companies sell gas directly to consumers, and numerous other examples. While brick and mortar locations are able to place their brands at eye level on shelves or in display windows, online companies similarly promote their own merchandise. Singling out one industry for a widely-used practice—and for the benefit of consumers—is just another example of anti-technology advocates seeking to punish large companies for being “too big.” Similarly, many consumers enjoy the option to buy generic brands.
In response to these “self-preferencing” claims, some lawmakers have called for a “Glass Steagall” for internet companies. While this proposal might benefit some competitors, lawmakers should instead focus on the consumer. A company’s use of vertical integration often benefits consumers. Lower cost options provide consumers with more choice. There is also plenty of competition in this space. Amazon’s share of retail sales is just 1 percent. There is also a misunderstanding of the online marketplace. Retailers do not compete solely on a single platform, but with products offered on other online platforms. If a competitor wishes, they are free to choose to use Ebay, Etsy, Facebook, or other platforms to sell their products. A misrepresentation of the market can create the false perception that major technology companies operate with an outsized market share.
Lawmakers also tried to point to mergers and acquisitions as “innovation kill zones.” However, the Third Way Report published by members on this Committee concedes that many of the mergers and acquisitions that take place are either pro-competitive or competitively benign. Again, integration and innovation by digital companies is critical not just to their growth, but to their survival. While there are not perfect substitutes for every online company, there are certainly competitors.
Some lawmakers on the right and left have a goal to break up “Big Tech” and are searching for a reason to take targeted action against a growing sector of the economy that millions of Americans have relied on during the COVID-19 pandemic. Disgruntled competitors should not guide antitrust policy. Vertical integration brings greater variety for consumers, who are free to choose between more options. While some lawmakers may be frustrated with consumers’ choices, they shouldn’t use this as an excuse to enact harmful and far-reaching antitrust laws. Antitrust policy focused around consumers and not competitors is the correct approach to ensure these heavy-handed regulations will not be used prejudicially against “large” companies who draw the ire of those on Capitol Hill.